Banks, technology companies and regulators should work together to find new ways of categorising risks emanating from burgeoning technology, which could affect a lender’s regulatory capital requirements, a new research paper urges.
The explosion in the past two years in the banks’ use of the cloud, artificial intelligence and blockchain technology means lenders’ traditional ways of managing risks — and regulators’ means of supervising them — are outmoded, reads the paper by industry lobby group UK Finance and management consultancy Parker Fitzgerald.
The paper, published days before sweeping EU legislation around data protection is introduced, argues that while these technologies bring efficiency and a way for banks to move off notoriously inefficient legacy systems, they also carry new risk.
Regulators already force individual banks to hold more capital if they judge that they are exposed to more operational risk, which includes cyber security and how a lender manages its relationship with outsourcers.
“As firms adapt so too must the regulatory principles under which they operate,” the paper stated. “This process should consider both how to achieve a…
